While last week the UK bond market breathed a sigh of relief when the BOE found more than enough willing sellers into its longest-maturity, 15Y+ repurchase, or POMO, operation, following the uncovered operation two weeks ago, today concerns have returned anew when moments ago the BOE reported that its GBP1.170 billion repurchase operation was covered “only” 1.54x (with GBP 1.799 billion in offers), down nearly by half from last week’s 2.93x, and suggesting that supply of longer-dated gilts may once again be getting scarce.
Just as importantly, the BOE bought all bonds at premium, with highest price paid at 141p and 151p. Most bonds were previously bought at a discount of 7p-45p, with just three issues bought at a premium of 1p-9p
In response, the yield on the 30Y gilt immediately tumbled as investors once again rushed into the longest dated bond as fears of a bond shortage have once again reemerged.
via http://ift.tt/2beSLxU Tyler Durden